The first details of the tentative contract between the United Auto Workers and General Motors appeared to be a whole lot of compromises made by both sides, but the details show something a bit better. From the moment the union went on strike against the automaker at midnight on September 16, it seemed there was a tacit understanding that this would be the last-ever contract negotiations of this kind.
That is to say, these were the last 20th-century-style UAW-GM contract negotiations. You might consider the concessions the UAW made after the 2009 GM and Chrysler bankruptcies to be all about the new millennium. But as the business press have widely reported in the 31 days since the old contract expired, the negotiations, which as of Thursday afternoon were waiting to be put to a vote by either the union council or the entire rank and file, represented the UAW’s chance to claw back many key concessions it made after the bankruptcies/bailouts, including the two-tier wage agreement and GM’s aggressive hiring of temporary workers.
Those two key issues gave GM (and Ford Motor Company and Fiat Chrysler) more flexibility in setting employment levels in an industry that has been hostage to market and economic ebbs and flows for more than a century, and much more so from the 1970s on, the period during which Detroit-based automakers saw their once 95 percent share of the U.S. market bitten into by Asian and European brands. Prior to the reorganization of GM, Chrysler/Fiat Chrysler, and Ford—the latter of which conducted its own reorganization while under CEO Alan Mulally; while it didn’t take federal bailout funds, did take an $8.9 billion U.S. Energy Department loan—the U.S. industry, including captive import brands, had overcapacity in North America of something like 5 to 6 million units per year.
Currently, overcapacity is running about 3 million units per year, and more than 1 million of that overcapacity is GM’s alone, according to the Center for Automotive Research. From that point of view, the tentative agreement looks very favorable to the UAW. Closing the gap between the two wage tiers will be cut in half, so it will take a new employee four years, not eight, to reach the top wage level of $32.32 per hour.
All UAW workers will receive a 3 percent raise in the contract’s second and fourth years, a lump sum of 4 percent will be paid in the first and third years, and GM’s Cadillac-level health-care package, with a 3 percent copay, remains intact. Temporary workers who already have three years’ service will be made full-time on January 6, 2020.
Temporary workers, who are key for GM to capping costs to match demand changes for models from certain assembly plants, will earn a $4,500 ratification bonus for the new contract, while permanent full-time workers will get $11,000 upon signing.
Under the old contract, annual profit-sharing checks to UAW workers were capped at $11,000, but under the new contract the cap is lifted. One talking point for the UAW cause was that CEO Mary Barra’s annual salary with stock options and incentives totaled more than $20 million last year.
This is a win for GM. U.S. sales peaked at roughly 17.5 million units per year for three calendar years, 2016 through 2018, and won’t reach or surpass that for several years, and you can count on GM’s net profit diminishing as it introduces 23 new electric vehicle models over the course of the contract. If GM somehow manages to meet or beat its 2018 net income of more than $8 billion, it probably will be happy to share the excesses with its blue-collar employees.
The threat of closing four of GM’s 55 UAW-represented facilities were a major point of negotiation from the beginning. Two of them, transmission factories in Warren, Michigan, and Baltimore, will close as scheduled, and the now-infamous Lordstown, Ohio, assembly plant, once home to the Chevrolet Vega (above) and more recently the Chevy Cruze, will (probably) be sold to electric pickup upstart Workhorse.
The fourth is GM’s Detroit-Hamtramck factory, which until recently built the Chevrolet Volt and Impala and Buick LaCrosse. GM announced in November 2018, long before contract negotiations began, that it was “unallocated.” Until negotiations began last month, it was scheduled to close and end production of the Cadillac CT6 in January 2020.
Under the tentative agreement with the UAW, Detroit-Hamtramck, which currently employs about 700 line workers, will remain open after January. That means unless GM quickly installs tooling for the EV pickup truck everyone expects to be built there, the Cadillac CT6 gets a reprieve, at least for the ’20 model year. The CT6 has been low volume by virtue of low demand, unfortunately, selling just 9,668 in the U.S. last year, but it runs on a short line at D-Ham. That means it’s possible to run a couple of different models at the assembly plant, even if they’re not at all related. And it’s hard to see how a new EV pickup truck, which we haven’t even seen yet, would be built from the get-go in numbers high enough to warrant shutting down the CT6 line.
Counterpoint to this argument for keeping the Cadillac flagship in production is that a facelift, including what is said to be a much-improved interior in terms of quality, fit and finish, already is in the works for the Chinese-market CT6, which means D-Ham would require an expensive retooling for a car that struggles to reach 800 units per month in the U.S. If Cadillac is managing to sell enough high-spec CT6-Vs with the Blackwing V-8, and CT6 Platinums with the Blackwing and Super Cruise without serious incentives, that might be enough to keep the D-Ham line running.
The other big car-enthusiast question tied to the UAW strike is the question of how soon those who have already ordered a mid-engined 2020 Chevy Corvette will take delivery. The answer is, who knows? Not even GM at this point.
Bowling Green was to be retooled from C7 production to C8 production this week, and clearly that will not happen. Chevrolet still has C7 orders on the books from loyal customers who want the last traditional front-engine model Corvettes off the line. But Chevy has been able to build a couple of truckfuls of production-grade C8s even with C7 tooling in the factory. My guess is a few lucky early C8 customers will see their cars delivered just before—or just after—the new year.